Global Trustee and Fiduciary Services News and Views Issue 50

Global Trustee and Fiduciary Services News & Views | Issue 50 | 2018 73 In the intervening decade, the post-crisis reforms have been built on four pillars: WHERE IS FINANCIAL SERVICES REGULATION HEADING NOW? In response to the 2007/2008 global financial crisis, the Financial Stability Board (FSB) was established as the successor to the Financial Stability Forum, with a broadened mandate to promote financial stability. The FSB’s remit was to “fix the fault lines of the financial system, working with national authorities and international standard-setting bodies”. 1 This “pivot” will be reflected by three priorities: 1. Disciplined completion of the G20’s outstanding financial reform priorities. 2. Rigorous evaluation of implemented reforms, to ensure the reform programme is efficient, coherent and effective. 3. And vigilant monitoring to identify, assess and address new and emerging risks. Of interest to asset managers from the first priority will be the upcoming consultation from the International Organization of Securities Commissions (IOSCO), which will issue proposals for developing comparable leverage measures for funds. Within the second priority, the FSB’s goal is to assess whether the G20 financial regulatory reforms are operating as intended, and to make policy adjustments, if needed, without compromising on either the original objectives of the reforms or the agreed level of resilience. As to the third priority, as the FSB horizon scans for new and emerging risks, it highlights that these may relate not only to current economic and financial developments, but may also “have to do with structural changes in the financial system.” The FSB identified technological innovation as one of the major themes that poses financial stability implications. To support its work in this area, the FSB published on 2 July 2018 a draft Cyber Lexicon for public consultation. 4 The draft lexicon comprises 50 core terms related to cybersecurity and cyber- resilience in the financial sector. • Making financial institutions more resilient. • Ending the problem of financial institutions being too-big-to-fail. • Making over-the-counter (OTC) derivatives markets safer. • And transforming shadow banking into resilient market-based finance. Where do regulators stand right now? The criteria to assess at a macro level are perhaps easier to gauge than at a firm level. For asset managers, it’s hard to quantify the cost of compliance, both from an implementation and ongoing maintenance perspective. Taking the EU’s MiFID II as an example, the legislative texts alone are estimated to contain 1.7 million paragraphs. Perhaps as a sole initiative, this would have kept those responsible for implementing regulatory change fully occupied, but all will be aware that the legislative machine has been working overtime. Its then with some relief that the FSB has recognised, as the new global regulatory framework is largely in place, that a marked shift in approach is warranted. This has meant that the emphasis is “shifting towards the full, timely and consistent implementation of the reforms, and the evaluation of their effects.” 2 The FSB has also pointed out that the visible shift in agenda is seen as its work “pivots from policy development to dynamic implementation.” 3